### Delaware: The First Recognized Tax Haven

#### Introduction

Tax havens are jurisdictions that offer favorable tax conditions to individuals and businesses, often encouraging foreign investment and incorporation due to low or null tax rates, financial privacy, and supportive legal frameworks. Among the earliest and most notable of such havens is the state of Delaware in the United States, renowned for its accommodating corporate environment and strategic tax policies that have been in place since the early 20th century.

#### Historical Development

Delaware's emergence as a tax haven began with the enactment of the General Corporation Law in 1899. This piece of legislation was designed to attract more businesses to the state by offering liberal incorporation laws and tax benefits that were uncommon at the time. Unlike other states, Delaware offered corporations the freedom to structure their businesses as they saw fit, minimal state taxes, and the convenience of managing corporate affairs without requiring directors or shareholders to be residents, or to hold meetings within the state.

#### Legal and Tax Features

What sets Delaware apart and cements its status as a tax haven is the unique combination of its legal and tax features. Firstly, the state imposes no sales tax, and it does not tax business operations conducted outside its borders. For corporations, this effectively means that income generated from activities outside Delaware (which constitutes the vast majority for many internationally operating firms incorporated there) can be shielded from state corporate taxes.

Moreover, Delaware has its own Court of Chancery, which uses judges instead of juries to decide cases. This court is renowned for its expertise in corporate law, which provides a predictable and sophisticated adjudication of complex corporate litigation. This legal certainty is highly attractive to businesses seeking a stable and favorable legal environment.

#### Economic Impact and Incorporation Statistics

The economic implications of Delaware's tax policies are significant. By providing a tax-friendly environment, Delaware has become a hub for businesses; more than 65% of Fortune 500 companies and countless smaller enterprises are incorporated in the state. This incorporation rush has, in turn, provided substantial revenues from franchise taxes, which constitute one of the state’s major income sources. The streamlined process and the benefit of predictable law handling by the experienced Court of Chancery continue to make Delaware an attractive place for new incorporations.

#### Criticisms and Global Context

Despite the benefits touted by proponents, Delaware’s status as a tax haven has not escaped criticism. Critics argue that such tax havens contribute to tax base erosion in other states and countries, facilitating a form of tax competition that can lead to a "race to the bottom" where jurisdictions competitively lower taxes to attract corporations, potentially undermining public finances globally.

Furthermore, in the global context, Delaware competes with other tax havens around the world, such as the Cayman Islands, Bermuda, and Luxembourg, which also offer tax advantages but with different emphasis and additional benefits such as secrecy laws and no corporate income tax at all.

#### Conclusion

Delaware's pivotal role as a tax haven is deeply intertwined with its historical, legal, and economic fabric. The state’s pioneering corporate laws laid the groundwork for an economy that substantially benefits from being a domicile to a vast number of U.S. and international corporations. While it continues to attract business for these reasons, it also faces ongoing scrutiny and calls for reform in the context of global financial transparency and fairness. The balance Delaware strikes between attracting business and navigating the ethical and economic issues related to tax haven status remains a significant chapter in the broader narrative of global finance and taxation.